Anderson v. Smith

Montgomery, J.

This is a suit to foreclose, as a mortgage, a contract which was considered in Anderson v. Smith, 103 Mich. 446. The terms of the contract are there set out at length. The most important question on this appeal is whether the item of $2,000 stipulated to *73be paid by Smith is usurious. The agreement, so far as it relates to this item, is as follows:

“That said first parties hereby agree, in consideration thereof, to pay said Andrew McLellan, trustee as aforesaid, the sum of $2,000, and, in addition thereto, the sum or sums said second and third parties shall have at any time invested in said property, and all expenses and sums of money whatever they may have at any time been put to or expended or laid out, in any way whatsoever, in connection with the said purchase and said property and any business arising therefrom, and such sum or sums as their services, rendered after such purchase, shall, in the opinion of said trustee, respectively be reasonably worth.”

It was determined in the former case between these parties that the transaction in question amounted to an advance or loan of money, and that the complainants Barbour, Rexford, and Phillips occupied the position of mortgagees. This must be taken as settled.

It was contended by the complainants that the defense of usury was not sufficiently pleaded. The answer did state “that the claim of said complainants is usurious, and that the instrument known as ‘ Exhibit B ’ provides for a bonus in the nature of a usurious rate of interest, and that by reason thereof said complainants are not entitled to recover against said defendants any interest upon the amount advanced under the terms of said Exhibit B.” It is true, this deduction as to the legal effect of usury is incorrect, as, under the statute in force when this contract was made (1 How. Stat. § 1595), the effect of providing for the payment of usury was only to forfeit the excess over the lawful rate of interest. The statement of facts was, we think, sufficient, inasmuch as the alleged usury appeared on the face of the paper itself. International, etc., Ass’n v. Biering, 86 Tex. 476; Stockham v. Munson, 28 Ill. 51.

It is also contended that there was no intention to exact usury; that the parties intended to engage in a joint venture in purchasing property, for a profit to be derived by them severally. But the legal effect of the transaction *74was an advance to the Smiths of a sum of money by Barbour, Rexford, and Phillips, at interest. This was determined by the former decision. The agreement did not provide for a sale of the property on joint account, but for the repayment of advances by Smith Bros.

It is also contended that the item of $2,000 may be treated as an agreed compensation for contemplated and necessary services, which were actually rendered. But it will be noticed that this is not stated in the agreement to be compensation for services. It does not include expenses, as these are fui’ther provided for; nor does it include services rendered after purchase, as these are also provided for, and to be compensated for in such sum as is deemed reasonable by the trustee. The only services, then, which could have been covered by this agreement, are those preceding the purchase of the property; and it is significant that the contract provided that, in case the purchase was not made, these should be paid for at the price of $150. There is no evidence in the record that the services were worth $2,000, and the inference, from the contract itself, is justified, that they were not worth that amount. We think that there is no escape from holding that this provision of the contract is usurious, to the extent that it exceeds the established value of the services; and, as the only tangible proof of value fixes the sum at $150, we think this item should be reduced $1,850.

It is further contended by defendants that there should be ’ a suspension of interest during the time the parties were litigating in the other case. We know of no principle which justifies any such holding. Defendants were in fault during all this time. They were at liberty to pay or tender the amount due, and there is no reason why, upon a failure to do so, the stipulated interest should not be allowed.

Nor do we think the decree should be modified in respect to the sale of the property. The decree provided that the personal property should be sold separate and apart from the realty. While the sales may be made at one and the *75same time, we see no reason to disturb the order that they must be made separately.

Complainants ask to have a further allowance of interest on another item which was disallowed in the court below, but, as they have not appealed, the question is not before us.

The decree will be modified by striking out the usurious item, and interest thereon, and defendants will be entitled to recover costs in this court.

The other Justices concurred.